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£1K to invest? I’d buy this FTSE 100 income and growth champion today

If you have £1,000 to invest today, but don’t know where to start, I think Schroders (LSE: SDR) could be an excellent opening stock for your portfolio.

One of the reasons why I think this business is such a good investment is it’s one of the few companies in the FTSE 100 still majority-owned by its founding family. Schroder family’s investment vehicles own just under 50% of the company’s voting shares

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The family’s interests are represented on the company’s board by Leonie Schroder, appointed after the death of her father in February, becoming the fifth generation to sit on the board since Schroders was founded in 1804.

Growing business

Over the past 215 years, Schroders has grown from a small family business into one of the world’s largest asset managers with £424bn of investors’ funds under management and administration (FuMA) at the end of 2018.

In my opinion, this wouldn’t have been possible without the Schroder families input. The majority ownership of the business means management can concentrate on growing the company for the long term, rather than chasing short-term profit targets.

Thanks to its wider perspective, growth has accelerated over the past six years as investments in areas such as customer service have paid off. Net profit is up 43% since 2013 and management has increased the per share dividend payout by around 100%. City analysts are expecting further growth in the years ahead with net profit expected to grow approximately 20% between now and 2020.

The one negative I see here is the stock’s valuation. Shares in Schroders are currently dealing at a forward P/E of 15. However, considering the asset manager’s historical growth, substantial brand value and family ownership, I think this is a price worth paying for what I believe is one of the best-managed companies in the FTSE 100 today. At current levels, the stock supports a yield of 3.8% as well.

Business transition

Another City stalwart with a storied history that could be an exciting addition to your portfolio today is Charles Stanley (LSE: CAY).

The business is currently in the middle of a substantial overhaul, moving away from low-margin execution-only share dealing and growing out the firm’s discretionary management services, which have higher profit margins.

So far, the results of this strategy have been mixed. All evidence points to the fact that discretionary FuMA are growing, but outflows from other lines of business are offsetting some of the improvement and restructuring costs are weighing on profits.

Indeed, at the end of March, the company reported discretionary FuMA of £13.1bn, up 6.5% year-on-year, although overall FuMA increased just 1.3% to £24.1bn. This trend has continued, according to the firm’s latest trading update for the three months to the end of June 2019. At the end of the second quarter, FuMA totalled £24.4bn, up 1.2%. Investment performance of £0.9bn offset net outflows of £0.6bn.

Charles Stanley expects to incur £9.5m of restructuring costs over the next two to three years, which will weigh on profit growth this year. Analysts are expecting profits to remain flat at 16.2p per share, putting the stock on a forward P/E of 17 at the time of writing.

This could be a bit pricy for some investors. But if the firm’s restructuring does start to yield results, it could be a price worth paying.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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